US – The asset management industry may be getting better at investing in other asset management firms, but it is still not yielding added value overall, according to recent research by Cerulli Associates. The research shows that most firms that have been acquired still fail to grow faster than their peers, based on an analysis of a sample of acquired US managers.
But things may be improving, as the failure rate based on year-end 2001 data shows that 54% of target firms failed to grow any faster than their competitors in the industry. The corresponding figure for the previous year was 67%.
Though last years was one of the worst years for the industry with assets worldwide falling at least 5%, according to Cerulli, the merger and acquisition activity was in line with the average for the industry, with nearly 40 transactions involving $400m in assets under management (AUM).
Acquisition activity outside the US picked up, but US firms were not leading the charge in 2002. In particular acquisitions of managers in emerging markets increased.
Organic growth remains the only way to steadily grow in asset management, says Cerulli. "The compound annual growth rate for organic-growth firms in the US for the eight years ending December 2001 is 17%, compared with 11% for the entire US Industry."
The full report ‘Targeted Perspective: M&A in Global Asset Management 2003’ is to be published in February. It includes a proprietary analysis of nearly 70 specific transactions to determine post-transaction asset under management growth rates.